LDDK points out that the aim of changes in the tax system is to promote economic development, increase competitiveness, increase the number of taxpayers and limit the shadow economy. The economic impact of the Covid-19 pandemic needs to take particular account of the new circumstances in which certain issues are becoming a priority. Therefore, the LDDK does not consider raising the non-taxable minimum to be a top priority when reviewing the tax system.
–
Employers’ representatives pointed out that the decision to raise the tax-free minimum was a political decision. “It is important at this time not to make hasty and ill-considered decisions that would place the greatest burden on existing taxpayers and employers, who, in an effort to overcome the consequences of Covid-19, still pay normal salaries appropriate to qualifications, work intensity and level of responsibility,” LDDK emphasized.
–
In the opinion of the LDDK, raising the upper limit of the differentiated non-taxable minimum (DNM) will adversely affect economic growth.
–
This would promote the preservation of a cheap labor economy, a shadow economy. Such a move would also reduce the competitiveness of legally employed, tax-paying companies,
–
hindering the transition of the economy to higher value-added and higher-wage sectors of the economy.
–
Also, in the opinion of the LDDK, if this step were supported, the growth of the gross domestic product would be delayed, the state’s ability to provide financing for the performance of the state’s mandatory functions would be further reduced. The LDDK considers it essential to abolish the DNM and replace it in a fiscally neutral manner with an equal, fixed non-taxable minimum to ensure economic growth. Otherwise, the economy will continue to stagnate, maintaining the risks of labor migration and insufficient budgets.
–
LDDK believes that when reviewing the tax system, priority should be given to ensuring the competitiveness and stability of the Latvian tax system, especially labor taxes, without increasing the rates in the general labor tax regime. Employees should also be more involved in paying taxes by introducing minimum contributions from the State Social Insurance Agency (SSIA) at the level of each person.
–
In the opinion of the LDDK, the crisis very clearly showed the large number of employed persons in Latvia without adequate social security and the current practice should be reviewed as soon as possible.
–
The LDDK emphasized the need to ensure greater social security for employees in the country as a whole, including access to health care and an adequate minimum wage. The current differentiated personal income tax-free minimum should be replaced by a fixed non-taxable minimum at a level that has a neutral impact on the budget. This would reduce incentives for envelope wages and also simplify tax administration.
–
In the opinion of the LDDK, competitive costs for employers at the Baltic level should also be ensured, such as telework costs, coverage and duration of sick leave, overtime, non-application of additional taxes to mobility, as well as the stability and sustainability of the pension system.
–
It has already been reported that with the New Conservative Party (JKP) insisting on raising the non-taxable minimum to 500 euros from 2021, five coalition parties have suspended negotiations on the planned tax changes indefinitely.
–
When interviewing the representatives of the parties forming the coalition, it can be seen that the JKP has a different vision of changes in the tax system than the other coalition partners. In the opinion of JKP, from next year the non-taxable minimum should be raised to 500 euros.
–
On the other hand, the other coalition partners consider the JKP offer to be too fiscally large – in the 2021 budget it would require an additional 120 million euros, which would make it more difficult to fulfill commitments such as raising salaries for doctors and teachers. The coalition partners are ready to discuss raising a more moderate non-taxable minimum from next year.
–
As reported, in February the government reviewed the informative report prepared by the Ministry of Finance “On Directions for the Development of the State Tax Policy Guidelines for 2021-2025”, which included a summary of proposals of political parties forming the government coalition to improve the Latvian tax system.
—
